The Key Facts and transcript of our Autumn funding webinar, with CEO’s Andrea Reynolds (Swoop) and Hannah Dawson (Futrli).
- Funding as we come out of Covid
- Refinancing CBILS
- Recovery Loans with the Recovery Loan Scheme (RLS)
- How to improve your chances of a favourable lending decision
- Using Futrli Predict to remove friction and speed up the application process
- Introducing Swoop’s new Growth Loan - unsecured from £500k-£5m
Hi! Ok, let's get stuck in. The announcement came that the Recovery Loan Scheme (RLS) became available post-CBILS.
The first thing I want to say is do not be disheartened if you’ve tried to apply for one or see that there aren’t many options. Typically, the government announces a scheme before they have accredited all of the lenders, so we always have this gap in liquidity in the market from government announcement through to actually on the ground loans being delivered.
The second thing to say is the scheme is now very much up and running. We have 70 lenders that are currently accredited for RLS, and I'm just going to give you a general synopsis of what to be thinking about when we think of recovery loans. It explains why Hannah and I partnered with Swoop and Futrli and why one complements the other. Essentially the Recovery Loan Scheme is available even if somebody has taken a CBILS or a Bounce Back Loan:
You can refinance, and you can increase that finance subject to affordability under this scheme. Why do that?
- Most of your clients will now be coming up to repayments of CBILS. The interest repayments the government made for CBILS on your behalf is now over, so your clients are now faced with capital and interest payments starting. Suppose you now look at refinancing the CBILS with an RLS. In that case, we have an extraordinary situation: competition is heating up because we've got so many providers in the market now. Each of them is trying to come up with their offers to outdo the other one, so now the good news for clients is we've now got lenders who will give an extra 12 months capital repayment holiday so you can refinance and pay interest only.
- When we were all going for funding during Covid, we were in the midst of it, so we hadn't got a set of filed accounts that could tangibly put a number on how Covid impacted our business, how have we recovered from that, or how have we managed to sustain ourselves. So, a pivotal point to anyone on this is if your clients can file their accounts and have not, they absolutely should. It improves credit profiling and enhances the lender's ability to assess that business. When they cannot evaluate it, they will price that into the interest rate - so there are several reasons you might look at refinancing CBILS.
- We've now got more data. We’re in recovery. We now know that we're vaccinated, and we're not hopefully not going to move into the same levels of lockdown again. This means less risk for lenders, and pricing now should reflect that.
For businesses looking for £25,000 up to £10m. The lesser of
- Up to £10m
- Twice your wage bill of the 2019 accounts (but this might not meet your liquidity needs)
- 25% of the turnover of your 2019 accounts (but this might not meet your liquidity needs)
- The liquidity needs of your SME for the next 18 months (this is key and the best option for most SMEs). (For enterprises, it’s 12 months of liquidity needs)
This last point is vital because your turnover may have gone down - so 25% of your turnover might not be enough to meet your liquidity needs. Your wage bill may not be as high - so it may not meet your liquidity needs.
Now how do you prove that to the lender? You do that through self-certification, and you do that through a complete cash flow forecast. You have to present a credible forecast to the lender.
Something to note: the British Business Bank has set these rules. Lenders care that you will survive and grow out of this and trade out of it to repay them. That's why they're offering things like 12 months capital repayment holidays and looking at what your business's liquidity needs are for the following 18 months. These are critical nuances to the Recovery Loan Scheme.
I urge anyone with a business or clients to consider the RLS if they didn't get CBILS; they are questioning whether they've got the best deal out there; or weren’t eligible for CBILS at the time.
If you've got clients who took out a Bounce Back Loan and didn’t have enough capital to get them through recovery, then a Recovery Loan can sit alongside your Bounce Back. That's another way to look to support your clients as they're trying to trade out of this.
One of the most significant issues that we encounter with our accounting clients trying to help their small businesses is to help them identify just who needs their help. Their accounting data doesn’t give a clear view of a business’s future and how current trends and analysis will create a future picture. Futrli can help any firm assess which clients are appropriate for funding help by running a Futrli Portfolio report. It will set every client’s cash buffer as well as other critical cash flow and operational metrics.
The benefit of this is that to run the Portfolio report, we connect your clients to our financial prediction software, Futrli Predict, which will create a robust 3-way cash flow forecast for three years. It only needs minimum human input to be submittable to any lender (it’s not called Futrli Psychic for a reason!). Within minutes, with minimal tweaking, you have a forecast that reflects your goals and future needs. You can turn off predictions and create your own within the software - which will be helpful when you show how a loan will help you grow.
And, crucially, there is a loan template within Predict. You need to use this with your application to illustrate how the loan impacts cash flow and whether you can afford repayments.
VAT calculations are even created for you automatically - we support both cash and accruals schemes. It’s then one click to export it to Gsheets and another to import it into Swoop.
Exactly - the friction has gone completely, and the credibility of a Futrli Predict forecast is the reason we’ve partnered.
You're going to need to self-certify that Covid has impacted you in a similar way to CBILS. I suppose the other key point to note is because it's a biggie. The following key topic I’m going to talk about is personal guarantees and the fact that no one ever wants to sign a personal guarantee or should never want to sign one.
Under CBILS, up to £250k, you did not have to provide a personal guarantee. It’s the same in the Recovery Loan Scheme. Under the scheme, lenders won’t take any personal guarantee for £250,000 or less facilities. If you’re borrowing more than £250,000, the lender has the discretion to decide whether to take personal guarantees. However:
- The maximum amount that can be covered under RLS is capped at a maximum of 20% of the outstanding balance of the RLS facility after the proceeds of business assets have been applied.
- No personal guarantees can be held over Principal Private Residences.
- If one lender turns you down, you can still approach other lenders within the scheme.
As a final note on RLS, high street banks don’t have a huge appetite for them. They have loaned millions, and millions in Bounce Backs and CBILS and so will no longer be the best route for your application.
Using Swoop, we’ll ensure that you apply for the best loan product for your situation without you ruining your credit score, applying for loans that were always going to be turned down. However, alternative lenders are only providing Recovery Loans, which is why there is such fantastic competition in the marketplace.
Is there any product that can inject significant capital without a personal guarantee?
Yes! We are now distributing a brand new unsecured growth product through Swoop as our first product with BNP Paribas. We have done it because we saw a gap in the market for solid SMEs with growth plans who cannot get funding.
Key Facts for the Swoop Growth Product:
- This is an unsecured loan from £500k to £5m.
- It sits in trade creditors, not within your balance sheet to sit alongside other debt you may have in the business.
- It's repayable for up to eight years.
- Minimum total assets £1m
- Minimum turnover £1m
- Either maximum total assets or turnover to be less than £50m
- Three years registered accounts or audited accounts
- At least two of the last three years registered audited accounts showing a net profit after tax
- Loans are not permitted for the sole purpose of repaying existing senior debt
- Having at least two directors or two shareholders
- Borrowing entity to have no more than 20 subsidiaries
- No payment default or demand event occurred (including payment overdue) over the last three years
- There is also a leverage cap of 4x EBITDA.
- Average APR of 8%
- Full Profit & Loss, Balance Sheet and Cash Flow forecast required mapped to the BNP Paribas underwriting classification. Futrli will help you with this.
- The forecast must have a growth loan amortised to illustrate affordability and the loan uses within the business.
- Covenants (success milestones) will be agreed upon and monitored throughout the loan.
The government has identified this as one of the most significant finance gaps. We’re trying to create flexibility on repayments: it's patient capital that we're talking about here. So if you’re a good solid business or you have clients that are being constrained by a lack of growth finance, this product is for you, and have I mentioned - it’s unsecured!
If you’re not confident about your business finances or what a forecast even is, Futrli Predict and our resource centre will create one for you and then handhold you through what it’s all about. Ideally, you decide about your business future within the realms of your financial prediction (when can I take on more staff? Not this month, but you can in 3 months. Can I afford my next VAT bill? Yes, if you shunt the payment date of this bill. If I start a new service line, when will it become profitable? Etc. )
It’s pretty bloody intelligent and will do 90% of the heavy lifting. I mean that it’s analysing all of your data and creating a more accurate forecast than a team of humans could every day for you. For more information, see here.
When applying for a loan, lenders look for robust forecasting: the quality of your forecast does come into play.
Throw in a cobbled-together Excel spreadsheet and a perception of that business forms. But, submit a three-way forecast that shows the trends of your industry with an understanding of the critical drivers of that business; you are already lending more credibility to the application itself.
It has been hard work producing forecasts (accountants, you know!), but I know from personal experience too - for years and years, I think of myself making them, even at KPMG, and it's just been hard work. So, I've checked all of the forecasting software providers out. I've checked them all out on behalf of lenders because our job at Swoop is to get people funded and remove the friction it takes to do it. But the reason we've partnered with Hannah and Futrli is that the quality produced by Futrli Predict and the fact that it is genuinely looking at a three-year plan and a three-year forecast is precisely what the lenders are looking for under this scheme. The other products we have on the platform.
Just a note for everyone: we get paid on success by lenders. They all pay us the same, so we're not favouring one over the other. We use our proprietary matching system to look at your circumstances and present suitable lenders for you.
Andrea, thanks so much for your analysis of Futrli Predict. For everyone on the call, we’ve done the same with Swoop. For me, we partnered because real trained humans back the experience, all of your eligibility criteria are looked at. Then the best recommendation for your business comes forward. Why is this important? Well, you're not burning your credit score: it's not being set in flames every time you apply for something. It's expediting you from a time perspective, so you're not wasting your time where you shouldn't waste your time, and then there are also grant options, equity options and other business savings that you can utilise. It takes responsible funding to the next level.
To sign up for Swoop, use this link http://swoopfunding.com/futrli
To learn more about the Swoop Growth Loan, use this link
To sign up for Futrli Predict, use this link: https://do.futrli.com/register/predict
To find out more about Futrli Predict, use this link: https://www.futrli.com/products/predict/business
To learn how to Predict, use this link: https://www.futrli.com/learn/futrli-predict-how-to-videos